EURGBP formed a long-term reversal pattern visible on its daily time frame, signaling that price is done with its climb and that a selloff could be due. The pair is still testing the neckline support at .8400-.8450 at the moment but a break lower could send it down by 700 pips or the same height as the chart formation.
The 100 SMA is still above the longer-term 200 SMA for now so the path of least resistance might still be to the upside. However, the gap between the two is narrowing, indicating that buying pressure is weakening and that a downward crossover could take place soon. Price is already moving below the 200 SMA dynamic support to show that bears are taking control.
Stochastic is close to the oversold region, which means that sellers are taking a break for now. A move higher could take the pair up for a quick bounce to the .8500 area or the 100 SMA dynamic inflection point before selling pressure picks up.
The euro has been selling off recently due to political issues in Italy and France, along with debt troubles in Greece and Italy. Even though flash manufacturing and services PMIs came in better than expected yesterday, the shared currency failed to gain any traction as it was dragged down by headlines.
On the other hand, the pound is staying resilient in hopes that the government’s Brexit plans can push through without a glitch through the House of Lords. The debates are still ongoing and traders are on edge for the outcome, but sources are saying that the timeline of triggering Article 50 by the end of next month is still a go.
UK public sector net borrowing was weaker than expected at a 9.8 billion GBP deficit while the BOE inflation report hearings confirmed that Carney isn’t sold on hiking just yet. The UK second estimate GDP is due today and any revisions to the preliminary 0.6% growth figure could push the pound in a strong direction.